John Roque observes:
“
For every year from 2002 to 2010 gold has, at least, corrected to its 40-week moving average and been down,peak to trough on average 15.6% (see table).”
Gold bottomed in 2001, and John’s table makes it clear that every year since “it has worked through consolidation phases.”
So far, this looks like the recent sell off is just another such a consolidation phase.
As of Friday’s close, Gold is down 12% from its early September highs, which was 3 standard deviations above its prior 200 day moving average.
John adds “So far gold is down 12% from its early September high (please recall that in late August we noted that gold was +3 standard deviations above its 40-week moving average, for all data back to 1987 and that a correction was likely). Support @ 1600 looks ok to us.”
I (BR) will add the following: When a trend channel has an parabolic breakout to the upside, the prudent thing to do is peel off 10 or 20%. This sort of vertical spike works itself off by falling back to at least the prior channel . . .
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